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November 1 began the 6 week open enrollment window that ends December 15. The health care exchange is designed to provide health care to Americans who are not covered by an employer provided health care plan.

The October 7th-13th cover of The Economist led with the phrases “The bull market in everything” and “Are asset prices too high?” The main article mentioned potential bubbles in equities (at an all-time high), fixed income (boosted by easy monetary policy), real estate (see the 2007 Financial Crisis), and cryptocurrencies (Bitcoin, Etherium, etc.). I will focus my attention on equities since they tend to be the most important, and largest, component of a client’s long-term growth. What I would like to share today are some of the counter-arguments I have come across in my research regarding high equity valuations. I will then finish up with investment themes, risks, and how we are currently positioning client accounts. Valuation Counter-Arguments Not all valuation metrics have reached extreme levels – Though above their long-term averages, none of the main valuation measures are stretched by more than 1 standard deviation. Higher valuations are warranted given fiscal stimulus reform ­– Deregulation, tax reform, and infrastructure spending add to economic growth thus boosting the E in P/E. It is worth keeping an eye on tax reform as it is appearing difficult to please both the moderate and budget hawk factions in the Republican Party. Removal of the FANG stocks reduces the S&P 500 P/E by approximately 1 point – Facebook, Amazon, Netflix, and Alphabet (Google) make up approximately 7% of the S&P 500. The removal of these four companies alone would bring the P/E ratio down closer to its 25-year average. Many supporters of tech-oriented growth stocks dismiss the importance of the P/E ratio altogether for valuing these types of companies because profits are foregone now and money is reinvested in pursuit of longer-term growth. There is a lack of excessive optimism – There is still a record number of idle cash sitting on the sideline with many skeptics still unsure of putting money to work. Not all equity markets have lofty valuations – Of all the major markets, the U.S. currently has the highest P/E ratio of 17.8 while Japan, whose valuations actually became more attractive in 2016, has the lowest at 13.8. These cheap valuations, along with a weakening yen and continued monetary stimulus, all point to the potential for strong performance for Japanese equities in the short to mid-term. To this last point, there are three stages to a secular bull market. The first stage was led by accommodative monetary policy and occurred from October 2008 – May 2015. The second stage, and current stage, began in early 2016 and is being driven by earnings growth. The last stage tends to consist of a speculative top led by excessive optimism and idle cash being invested as investors begin to fear missing out. There is no saying when this will occur but it is important to remember that bull markets do not die of old age. Investment Themes We continue to favor equities over fixed income in part to rising growth expectations and the continuation of gradual monetary tightening We favor international over domestic due to more attractive valuations, stabilizing commodity prices, and a weaker dollar We favor shorter to intermediate-term duration given a potential flattening of the yield curve. Prefer EM debt and Credit strategies over Mortgage-Backed securities and treasuries. We maintain strategic allocations to cash and alternative strategies to weather short-term volatility and provide liquidity. We view any market pullback (5% or more) as a buying opportunity and would look to add to equities Risks Geopolitical risk – any increased escalation with North Korea or Iran poses significant short-term risk. Also, trade disputes with China and NAFTA would have broader ramifications...

Sorry for the pun (hopefully you have heard of The Story of Goldilocks and the Three Bears), but as we get near year-end it seemed opportune to discuss the current market sentiment and our future outlook. The U.S. economy is currently in a sweet spot, or a Goldilocks effect, of not being too hot to spur rapid inflation but not too cold to cause a recession. A bear market, loosely defined as a drop of over 20%, and a recession, two consecutive quarters of negative GDP growth, seem a long way off. There are a few factors that warrant monitoring: Loose Fiscal Policy – U.S. GDP in a range of 2-3% has historically been the sweet spot of accommodative monetary policy and low inflation. An overextension of fiscal stimulus may push the economy too fast forcing the Fed to tighten their policy. The ensuing run in inflation would lead to tightening in the monetary policy regime, often a key factor leading up to a recession. Black Swans – Unforeseeable events such as geopolitical tensions do exist but beyond a short-term negative reaction the market tends to bounce back rather swiftly. The current market environment consists of historically low interest rates, stable oil prices, 10-year highs in global manufacturing indices, low unemployment, and the absence of a bubble within the financial system. Given these views, our belief is the likelihood of a recession or a bear market is very low over the next year. Any pullbacks in the market can be seen as an opportunity to add equity exposure. Risks Extensive fiscal stimulus could lead to the U.S. economy overheating High impact; low probability Continued political uncertainty surrounding the year-end fiscal cliff High impact; low probability Escalating tensions with North Korea High impact; low probability China suffers a prolonged economic recession High Impact; medium probability Investment Themes Stocks continue to look more attractive over fixed income given strong earnings growth and slowly rising rates Credit looks more attractive than Treasuries, but a diversified approach to investing in fixed income is important given Fed tightening International equities are favored over domestic equities given stronger growth prospects abroad and favorable currency returns Written by: Antonio Belmonte, CFA *These are the opinions of Antonio Belmonte and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. Past performance is no guarantee of future results. Diversification and asset allocation strategies do not assure profit or protect against...

The dreaded Free Application for Federal Student Aid will be available October 1st of this year and should be easier to complete because you can use 2015 tax returns and not have to do any updates in the spring after filing your 2016 returns. The following link summarizes the changes and gives some tips on obtaining the most aid possible. http://money.cnn.com/2016/09/25/pf/college/fafsa-application-changes/ But for those people who are new parents or still have children younger than college age there is still the daunting question of “How will I pay for college”. As is the case with all long term goals, the earlier you start saving, the better your account balance should look over time. This is due to the power of compounding interest. If you start to save for college from the time your children are born, separating those accounts from all other funds, you will have at least part of the balance covered. There are many strategies out there, most focus on some ratio of parental savings, financial aid, current income and in some cases, help from family. It is impossible to know what a newborn child will want to do when they are 18 years old: Will they want to go to a 4 or 2 year school? Public or private? Trade school? Travel the world? So what are the best steps for a parent to take now? Fund your retirement accounts first. Students can get loans for education, there are no “retirement loans” available at this point! Save money in college savings accounts. The money will grow tax deferred and can be withdrawn tax free if used for educational purposes. The funds can also be transferred among family members for educational purposes if necessary. Save money in Roth IRA accounts in the parent’s names. Any contributions into the account can be withdrawn tax and penalty free if used for education and the account is not included in assets on the FAFSA form. http://www.marketwatch.com/story/3-reasons-to-use-a-roth-ira-to-save-for-college-2015-03-25 Stress academics over athletics for scholarship purposes. Yes, there are plenty of athletes with full scholarships at the larger schools, but many more kids get grants and scholarships for academic achievement. Volunteer hours can lead to extra money as well. Most importantly, don’t give up hope that your child will not be able to afford college or will be saddled with huge loans. Make smart economic choices about the college they choose and discuss the finances of college with your child early in high school. We have software available that can help you plot your course for the best possible outcome for you and your family. Cheryl Sternasty,...

The applications are in, standardized tests are complete and a college decision has been made. Now all there is to do is outfit the dorm room and drop the kids off, right? Maybe not. A recent visit to an attorney’s office to update our estate documents opened our eyes to something that we hadn’t thought of before. Consider a horrible, but not unthinkable situation: Your adult child is no longer living in your home. You get a call from a roommate or friend saying that there has been a medical emergency and your child is in the hospital. Your first instinct is to call or rush to the hospital to find out what is happening and…you are denied access to any information. What happened? HIPPA rules prohibit you from having the right to obtain medical information on your adult child, even if you are paying for their health insurance and they are covered by your plan. It is up to the medical provider to disclose information to family members if they feel it is in the patient’s best interest, but it’s not a requirement. There are 3 pieces of documentation that you should consider putting in place for your adult children: A HIPAA authorization, Medical Power of Attorney and a Durable Power of Attorney. Each form has a specific purpose that can best be explained by a trusted attorney. A brief description of each, along with links to the sources is below: http://www.consumerreports.org/health/help-your-college-age-child-in-a-medical-emergency/ http://www.forbes.com/sites/deborahljacobs/2014/08/15/two-documents-every-18-year-old-should-sign/#4d75a6d6fefd HIPAA authorization A signed HIPAA authorization is like a permission slip. It permits health-care providers to disclose your health information to anyone you specify. A stand-alone HIPAA authorization (not incorporated into a broader legal document) does not have to be notarized or witnessed. They can stipulate not to disclose information about sex, drugs, mental health, or other details they might want to keep private. Medical power of attorney/Health care proxy In signing a medical POA you appoint an “agent” to make medical decisions on your behalf in case you are incapacitated and cannot make such decisions for yourself. Each state has different laws governing medical POA and, therefore, different legal forms. In many states, the HIPAA authorization is rolled into the standard medical POA form. Durable power of attorney As an additional step, young-adult children might consider appointing a durable power of attorney, enabling a parent or other designated agent to take care of business on the student’s behalf. If the student were to become incapacitated or if the student were studying abroad, the durable power of attorney would be able to, for example, sign tax returns, access bank accounts, and pay bills. Cheryl Sternasty,...

Several of the people in our office have college-age children as do our clients, so conversations around topics to prepare us for when our children enter the work force full-time occur frequently. In general, we find that the young people want to be independent and are willing to learn what is necessary to make informed financial decisions. The area that recent graduates have the most questions about is 401ks and other retirement plans: what they are, how they work, what a company match is and how much they should save? Our recommendation is generally to contribute enough to receive the full match, because why forgo free money? That leads to a discussion of Roth vs. Traditional contributions. The appropriate choice will depend on the income tax situation, and the answer may be 100% Roth, 100% Traditional or some combination of both. Next, a discussion about budgeting. There are several online tools available to aid in the budgeting process. We have one that guides our clients step by step, and can aggregate all of their financial accounts together so they can be seen in one spot, and therefore, more easily tracked. It also has several informational videos for young people to learn the basics of personal finance. What if their compensation package included a signing bonus? What is the best use for that money? Pay down student loans or save it for an emergency fund? Use it to decorate the new apartment? Buy a new wardrobe in honor of joining the work force? Budgeting can lead to a discussion of debt. There is a widely used rule of thumb that student loans shouldn’t total more than your expected first year’s salary. This rule acknowledges that those students moving into a higher-paying field can afford to take on more debt, because they should have the wherewithal to pay it back. Our suggestion is often to set aside enough to cover at least 6 months of expenses in case of job loss or other unforeseen emergency. They can add the student loan payments to the budget and start chipping away at it monthly. If they apply the full amount to student loans they would lower the balance, but what would they do in case of an emergency or financial setback without a “cushion”? While many young people rely on the internet to provide them with advice on virtually everything, it makes sense to talk to an understanding professional to get those initial questions answered. Opening up a line of communication can be valuable down the road as careers progress and issues become more complicated. Our advisors welcome the opportunity to counsel the children of our clients. We can provide basic information and online tools to help recent graduates navigate financial decisions surrounding entry into the work force, repaying student loan debt, budgeting and preparing for a successful adult life. by Cheryl Sternasty,...